United States: CERCLA Contribution Claims: The Ninth Circuit Weighs In On Two Circuit Splits

In ASARCO LLC v. Atlantic Richfield Co., the Ninth
Circuit Court of Appeals recently addressed two Circuit splits
regarding contribution claims under Section 113(f)(3)(B) of the
Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA).1 First, the Ninth Circuit joined the Third
Circuit in holding that settlement agreements for investigating or
remediating contamination under an authority other than CERCLA
(e.g., state law; RCRA) can give rise to a CERCLA Section 113
contribution claim.2 Second, the Ninth Circuit weighed
into what does it means for a settlement agreement to
"resolve" liability so as to trigger a CERCLA
contribution claim by adopting a case-by-case analysis of whether
"the settlement agreement decides with certainty and finality
a PRP's obligations for at least some of its response actions
or costs as set forth in the agreement."3

The Ninth Circuit's views on both of these Circuit splits
will have ramifications on CERCLA litigants both in and outside of
the Ninth Circuit. This advisory addresses below what you need to
know about this latest development in the CERCLA contribution claim
caselaw.

Courts have been divide over whether a settlement agreement for
investigating or remediating contamination under an authority under
than CERCLA (e.g., state law; RCRA) can give rise to a CERCLA
contribution claim.

This issue can be a crucial one for litigants. Most notably, if
such agreements do trigger a CERCLA contribution claim, then the
settlor must pursue any CERCLA recovery solely through a CERCLA
contribution claim and not through a cost recovery claim under
CERCLA Section 107.4 Plaintiffs, however, would
generally prefer to bring a CERCLA Section 107 cost recovery claim
instead of a Section 113 contribution claim, since a Section 107
cost recovery claim is subject to a longer statute of limitations
for certain costs5 and is not subject to the CERCLA
contribution protection bar.6

In ASARCO LLC v. Atlantic Richfield Co., the Ninth
Circuit found that CERCLA Section 113(f)(3)(B)'s "text
says nothing about whether the agreement must settle CERCLA claims
in particular" in order to give rise to a Section 113(f)(3)(B)
contribution claims.7 The Ninth Circuit therefore turned
to three sources to conclude that a settlement agreement need not
settle CERCLA claims to trigger a Section 113(f)(3)(B) contribution
claim. First, the Ninth Circuit contrasted Section 113(f)(3)(B)
with the other CERCLA contribution claim provision at Section
113(f)(1) (which does have an express CERCLA predicate), finding
that the textual differences between these two provisions provide
"strong evidence that Congress intended no such
predicate" in the case of CERCLA Section 113(f)(3)(B)
contribution claims.8 Second, the Ninth Circuit found
that such an interpretation was "consistent with CERCLA's
broad remedial purpose" and Congress' goal to incentivize
parties "to settle and initiate cleanup" of
contamination.9 Third, the Ninth Circuit noted that EPA
itself endorsed this interpretation and that EPA's view was
entitled to Skidmore deference.10 For these
reasons, the Ninth Circuit held that ASARCO's RCRA settlement
triggered a CERCLA Section 113(f)(3)(B) contribution
claim.11

With this opinion, the Ninth Circuit joins the Third Circuit
Court of Appeals, which held in 2013 in Trinity Indus., Inc. v.
Chicago Bridge & Iron Co., that a settlement that resolved
state law liability for a response action triggered a CERCLA
Section 113(f)(3)(B) contribution claim.12 District
courts, including the court below in ASARCO LLC v. Atlantic
Richfield Co., also have endorsed the interpretation advanced
by the Ninth Circuit.13

On the other side of the Circuit split is the Second Circuit;
however, the Second Circuit appears willing to rejoin its sister
Circuits on the other side of the fence once given the opportunity
to do so. In 2005, the Second Circuit in Consolidated Edison
Co. of N.Y. , Inc. v. UGI Utilities, Inc., held that CERCLA
Section 113(f)(3)(B) creates a "contribution right only when
liability for CERCLA claims . . . is resolved." 14
The Second Circuit's interpretation rested heavily upon a 1986
House of Representatives Committee report. But, as both the Ninth
and Third Circuits have noted when they subsequently split with the
Second Circuit on this issue, this report reported to "a
different provision—§113(f)(1)" and not Section
113(f)(3)(B), which was at issue.15 Indeed, the Second
Circuit in its 2010 opinion Niagara Mohawk Power Corp. v.
Chevron U.S.A., Inc., strongly hinted that the Second
Circuit's interpretation first expressed in Consolidated
Edison was incorrect and that EPA's contrary view had a
"great deal of force . . . given the language of the
statute."16 In other words, the Second Circuit
appears poised to reconsider its prior interpretation and resolve
the Circuit split once it is confronted with this issue again.

With the Ninth Circuit's recent opinion, the clear trend in
caselaw is toward finding that non-CERCLA settlement agreements
(including those issued under state law or RCRA) may trigger CERCLA
Section 113(f)(3)(B) contribution claims. Consequently, non-CERCLA
settlors that hope to turn to CERCLA to recover some of their costs
for investigating or remediating contamination under RCRA or state
law settlement agreements may find themselves subject to, among
other things, a shorter statute of limitations than what might have
been available had they been able to pursue recovery under CERCLA
Section 107.

The Ninth Circuit Adopts a Substance Over Form Case-by-Case
Approach to Whether a Settlement Agreement Resolves Liability

The second Circuit split at issue in the Ninth Circuit's
recent opinion pertained to what does it mean to
"resolve" liability to the United States or a State for a
response action in a settlement agreement? Only if the settlement
agreement resolved such liability does the settlement trigger a
CERCLA Section 113(f)(3)(B) contribution claim.17 Both
the Sixth and Seventh Circuits have opined on this issue and have
reached different conclusions depending on the language of the
settlement agreements at issue.18

The Ninth Circuit weighed into this morass by first agreeing
with the Seventh Circuit that to "resolve" liability
means that "the nature, extent, or amount of a PRP's
liability must be decided, determined, or settled, at
least in part, by way of agreement with the EPA."19
Ultimately, the Ninth Circuit held that "a PRP 'resolve[s]
its liability' to the government where a settlement agreement
decides withcertainty and
finality a PRP's obligations for at least some of
its response actions or costs as set forth in the agreement"
and "[w]hether this test is met depends on a case-by-case
analysis of a particular agreement's
terms."20

Along the way, the Ninth Circuit disagreed with courts that
relied upon two boilerplate settlement agreement provisions to tip
the scales against a finding that a settlement agreement resolved
liability and triggered a CERCLA Section 133(f)(3)(B).

First, the Ninth Circuit departed from the Sixth Circuit's
decision in Florida Power Corp. v. FirstEnergy Corps that
a disclaimer of liability in a settlement agreement weighed in
favor of concluding that the agreement did not "resolve"
liability.21 The Ninth Circuit instead concluded
"that it matters not that a PRP refuses to concede liability
in a settlement agreement" and adding that, in fact,
"requiring a PRP to concede liability may discourage PRPs from
entering into settlements because doing so could open the PRP to
additional legal exposure," which in turn would frustrate
Congress' intent of encouraging settlements and expediting
cleanups.22 Consequently, at least in the Ninth Circuit,
boilerplate disclaimer of liabilities found in most all settlement
agreements, including EPA's model CERCLA settlement
agreements,23 will not bar a CERCLA Section 113(f)(3)(B)
contribution claim.

Second, the Ninth Circuit disagreed that the "government
must divest itself of its ability to enforce the agreement's
terms" in order for an agreement to "resolve" the
settlor's liability, concluding that such a view would make it
"unlikely that a settlement agreement could ever
resolve a party's liability" "because CERCLA prevents
a covenant not to sue from 'tak[ing] effect until the President
certifies that remedial action has been
completed.'"24 For further support, the Ninth
Circuit relied upon a 1986 Congressional committee report that
"expresses Congress' intent to encourage settlements by
creating a right to contribution" and also encouraged EPA to
include in settlement agreements the ability pursue further
enforcement action.25 As the Ninth Circuit explained,
"having sung the praises of settlements providing for a right
of contribution in one part of the report, it would make little
sense for Congress to encourage EPA to craft settlements in a way
that nullifies that right in another."26 Indeed,
EPA's model CERCLA settlements reserve EPA the right to take
action against the settlor if the terms of the settlement agreement
are not satisfied.27

The Ninth Circuit's holding that settlement agreements under
an authority other than CERCLA (e.g., state law; RCRA) can give
rise to a CERCLA Section 113(3)(f)(B) contribution claim now
constitutes the majority position among the Circuits and may not
remain a Circuit split once the Second Circuit can revisit its
prior interpretation and join the Ninth and Third Circuits.

The Ninth Circuit's interpretation on what it means for a
settlement agreement to "resolve" liability should
provide settlors (including those who enter into EPA's CERCLA
settlement agreements) greater confidence that their agreement
bestows a right to contribution under CERCLA. Although a specific
settlement agreement resolves liability and therefore triggers a
CERCLA Section 113(f)(3)(B) contribution claim remains a
"case-by-case analysis," the Ninth Circuit has directed
that such analysis should focus not on boilerplate provisions, but
on a more holistic analysis of whether "a settlement agreement
decides with certainty and finality a PRP's obligations for at
least some of its response actions or costs as set forth in the
agreement."28

Footnotes

1. There are two different types of contribution claims
under CERCLA Section. Section 113(f)(3)(B) bestows a contribution
claim upon a party once it "has resolved its liability to the
United States or a State for some or all of a response action or
for some or all of the costs of such action in an administrative or
judicially approved settlement . . . ." 42 U.S.C. §
9613(f)(3)(B). Section 113(f)(1) bestows a contribution claim to a
party "during or following any civil action under section 9606
of this title or under section 9607(a) of" CERCLA. 42 U.S.C.
§ 9613(f)(1).

8. Id. ("Where Congress includes particular
language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that Congress
acts intentionally and purposely in the disparate inclusion or
exclusion." (quoting Russello v. United States, 464
U.S. 16, 23 (1983))).

22. ASARCO, 2017 WL 3427708, at *12. E.g., EPA,
Model Administrative Settlement Agreement and
Order on Consent for Remedial Investigation/Feasibility Study
¶ 3 (April 2017) ("(T)he actions undertaken by
Respondents in accordance with this Settlement do not constitute an
admission of any liability.").

24. ASARCO, 2017 WL 3427708, at *11 (quoting 42
U.S.C. § 9622(f)(3)).

25. Id.

26. Id.

27. EPA, Model Administrative Settlement Agreement and
Order on Consent for Remedial Investigation/Feasibility Study
¶ 86 (April 2017) ("These covenants are
conditioned upon the complete and satisfactory performance by
Respondents of their obligations under this
Settlement.") (emphasis added).

The Sierra Club filed a citizen suit under the Resource Conservation and Recovery Act ("RCRA") against Chesapeake Operating LLC, Devon Energy Production Co. LP, Sandridge Exploration and Production LLC, and New Dominion LLC ...

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